Stochastic optimization applied to self-financing portfolio: does bequest matter?

摘要: The article studies stochastic optimization of an intertemporal consumption model to allocate financial assets between risky and risk-free assets. We use a technique, in which utility is maximized subject self-financing portfolio constraint. papers literature have estimated the errors Euler equations using data from markets. It has been shown that it sufficient test first order equation implied by model. However, they all assume constant consumption–wealth ratio constrains boundary conditions, hence influencing coefficient risk premium. main contribution our we drop assumption ratio. analytical solution maximization with portfolio. introduce terminal condition wealth without bequests. also simulate portfolio, distinguishing risk...